04 June 2015 by lberuti

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Macro considerations have played a major role recently and they have dictated the way markets have moved. The Greece never-ending soap and interest rates fierce moves have captured investors’ attention and overshadowed everything else. Nevertheless, some technicals are hard to shake off in the credit market. Risk premia have widened across the board over the last month (you can the pins are pointing right on the above grapple) and that went hand in hand with some steepening of the CDS curve (pins are mainly pointing up). Indeed when dealers increase a 5 year risk premium by 10% for instance, they tend to apply the same multiplier on all the points of the curve. This was duly recognized by the credit indices, and particularly by iTraxx Main which has steepened by almost 5bps during the last month. Furthermore in a fortnight, the single name roll will take place and it traditionally leads to some index curve steepening. Whatever the next move of the market, one should expect even steeper index curves at the end of June.